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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: 10K a day who wrote (45586)	4/11/2000 12:45:00 PM
From: Ron Dior	Read Replies (1) \| Respond to of 99985

OT Why tech is the better value! Yes while it is true the technology stocks are trading at very high P/E ratios and are overvalued when compared to actual earnings, does it mean so called "old economy" stocks will continue to be a better value? Let's look at the facts. The pro's are saying that old economy is needed for new economy to be successful, but the facts show the opposite is true. Take the transport industry for example. In the beginning when man first realized there was a need for faster and better forms of transportation. The animal (Ass, bull, horse, etc.) was then being used which proved to be slow, time consuming and difficult to maintain. The power engine was soon invented causing a boom in the economy. The auto industry spurred on growth like was never seen before. It seemed to be growing by leaps and bounds. Cars became better, cheaper, faster and easier to maintain. Then we went to the skies and seas. The economy was booming like never before because the world was becoming smaller. But then something changed. By the time the 60's hit this technology began to slow due to realized and unavoidable constraints. Because of laws and technological dead ends the changes in these vehicles became less and less. The industry then decided in order to keep growing they would need to go to another industry for help. Where would they go? You guessed it, the technology industry. These vehicles started to utilize things such as luxury electrical add-ons, computerized brains, and computerized engineering. It didn't stop there though. Because the profit margins were still to low, due to labor being to high, they had to turn to the technology companies once again. The tech industry developed ways of computer automation and robotics which spurred on a new found interest in the transport industry, but was it enough? This brings us to our day. The transports have been lagging, why? Because simply put, where do we go from here? Will cars next fly? Will we be flying in space? Will ships and trains be able to travel at much higher speeds in order to compete with airplanes? Will they still be safe? The answer is yes to all of the above, but only with the help of you guessed it, the tech companies. This is why "old economy" needs "new economy" to grow in order to stay alive. If the old economy stocks never grow again the ?new economy stocks? will continue to grow, but not the reverse. Now another question remains, who will make the most money? Well let's use another industry to peer into this thought. Let?s take the agricultural sector. Let's say you were a corn producer and you had a huge crop. Now a new technology comes along inventing an power engine that will run on corn. Now at first glance one could say, let's invest in corn because now these fields will be worth millions. But would that be the smartest move? First of all, because of the new demand for corn, the supply would have to be there. The old way of harvesting would no longer be good enough. Also, the process of turning corn into fuel would have to have been developed by someone. Because of this there would have to be tech companies inventing the processing units, harvesting units and then patenting them. Computer chips would be involved and other new technologies would have to be implemented. The bottom line is, this new boom in the corn market would not happen without new technology. Who would make the profits? The tech companies no doubt. Why? One because they will be able to set there price where the corn producers will be battling for market share. Two, the technology will always be growing while the demand for corn will eventually peak. Three, new technologies could at anytime come along inventing a way to use other vegetables as well. This will cut the corn margins in half as the tech continues growing. These similar fundamentals apply to all "old economy" stocks. The future is changing whether for better or worse. Where are we in the stream of time? We are where the transport industry was 100 years ago. We are at the beginning of the technological boom. Many of the old economists will have you believe we nearing the end, but we know better. Why? Thanks to the "new economy", the average individual has access to more information than ever before. Allowing them to make educated and intelligent decisions on their own. You can surly bet the old economists do not like it for now they are no longer the god's they once were. They are no longer revered, but are pitied. Yes it is true. New economy is here to stay????? Ron Dior